Acura dealers would like more clout in sedan segments
Dealer since: 1984
Dealership: Lehigh Valley Acura, Emmaus, Pa.
Average monthly sales: 40 new, 40 used
Quote: "We're happy with where we're going, but it's never fast enough for us."
This looks like an important year for Acura.
The brand's venerable TL mid-sized sedan will be replaced with a new model, the TLX, this summer. Although the car is a bit smaller, Art Wright, chairman of the Acura Dealer Advisory Board, expects it to appeal to a broader swath of consumers than the model it replaces and help revive the brand's sluggish sedan sales.
But Acura's entry- to mid-luxury turf is going to get more crowded this year when new $30,000 offerings from German brands hit showrooms in greater numbers.
Wright, owner of Lehigh Valley Acura in Emmaus, Pa., spoke with Staff Reporter Ryan Beene about how Acura dealers fared in 2013 and what's ahead this year.
Q. How was 2013 for Acura dealers?
A. It was a decent year. We came off a big increase in sales in 2012. We had a pretty good 2013 with a pretty good increase in light of the fact that 2012 was so big.
What major issues do Acura dealers face in 2014?
The big issue is that we have to get our sedan sales going. Of course our trucks are doing great. The MDX just seems like it sets records all the time, and the new model is just fantastic. The RDX, when they made the model changeover, that car continues to sell more units month after month. I think the big issue is to get the sedans moving in the right direction.
What do you hope to accomplish as chairman of the dealer council?
Our short-term goal is to improve dealer profitability, and in the longer term, continue to grow the lineup, especially on the sedan side so that we can accommodate more customers.
Are Acura dealers profitable?
They are profitable, and this was a pretty good year from a profitability standpoint. It's not great. I don't know if you've ever talked to a dealer who said profitability was great.
We think there's definitely room to improve, especially when compared to other luxury brands.
What areas of the business need the most help in terms of profitability?
If we just got our sedans moving and get some more volume in the sedan end of the market, that would be a huge improvement. That's why we're looking forward to the TLX. We think we'll have a hierarchy now. It was a good move when they explained it to us, almost five years ago now.
What do you know about the TLX so far?
The car they're going to show in Detroit is very similar to it. We do know that there's going to be a four-cylinder, a six-cylinder and six-cylinder version with all-wheel drive. We think it's going to have a broad appeal which is really good from the standpoint of a customer will now be able to come into our brand on the ILX, move to a TLX and they'll be able to move up within the TLX before going to the RLX. We think that's a pretty good plan.
Do you know any details about how Acura will launch the vehicle or what types of customers they're going after?
They haven't shared those with us yet, but if you look at the models and where they're coming in, this is going to be an extremely important vehicle, but it's going to be a much broader vehicle than what you've seen typically from Acura, like when you have an ILX with a few variations.
This will be a model lineup where the customer will really be able to decide where he wants to go.
Will it have a hybrid powertrain as well?
We certainly hope it will at some point, but they have not announced that. As dealers, we think having that technology would be a good thing for us.
Has Acura said very much about whether some of Honda Motor Co.'s turbocharged engines will migrate to Acura? Will the ILX get a turbocharged engine?
We just had a [board] meeting before Christmas, and in our discussions with them they have not committed to any one technology. They're looking at a broad spectrum. It wouldn't surprise me if something like that happened, but I don't have any direct knowledge if that's going to happen at this point. We certainly as dealers would encourage that. That's one of the things that we're encouraging them to do, offer all forms of technology.
Acura for a long time has sort of danced between luxury and entry luxury. Where do you see the brand today?
We're in a very interesting time. You have some of the well established luxury brands like Mercedes and BMW that are coming down in size in order to meet the CAFE requirements, and you have Acura, which has pretty much been in that area for a while and is now trying to stand up. We think, from what we've seen from the TLX plans and the plan that they brought to us almost five years ago of the hierarchy that's now being established, that's a pretty good strategy. And from a pricing standpoint, it really puts us into the marketplace where most of the sales are taking place in luxury segments today.
We're happy with where we're going, but it's never fast enough for us.
Why hasn't Acura been able to replicate the leadership position it has in SUVs with its sedans?
When you look at the SUV market and the styling of SUVs, they've been able to capture that market from a styling and a ride standpoint. They've really given the customer what they've wanted. The way the MDX has evolved, it's not dissimilar to how the Odyssey has evolved.
When you go to the sedans, they got a little bit too conservative and the evolution of the cars didn't progress as much as they should have, when you look at what the competition was doing.
I just think they have to be a little more progressive in their styling and they have to diversify their powertrains. We're excited about the TLX.
We think the whole concept of what they're trying to do there is going to be pretty good.
Is the RLX flagship sedan getting any traction? Sales seem slow.
The initial sales were kind of disappointing. We've had a couple of good months with it now, and I think the all-wheel-drive version coming soon will really help sales, especially in areas like Washington and Boston where awd is very important.
What number in line are you for your own personal NSX?
I definitely want to keep one, but I have several customers that have been very loyal to us. We were the 38th Acura dealer in the country to open up, and two of our customers have already raised their hands to me. I'll probably defer to them first. It's certainly going to be an exciting car. It's going to be a real boost to the franchise, and the halo effect will be very good with that car.
When it comes out, will you have to stock one in your showroom at all times? What's the sales plan?
We've gone through a lot of scenarios, and they've asked for a lot of input from the dealer advisory board, which we were very happy about. No decisions have been made on how they're going to distribute the car, but I think there are some exciting things coming that unfortunately I'm not at liberty to discuss right now. From the dealer advisory board's perspective, they've been great on taking our input on how this is going to work because there's such a limited quantity that will be built. The dealers are going to be very interested in how it's going to be distributed and how it will work and all indications are that it will be very, very fair to the dealer body, and that's our No. 1 objective.
What's your opinion of the work thus far by Mullen, Acura's new ad agency?
Advertising in general is kind of in the eye of the beholder. Some people like it and some people don't like it. From our perspective, it's been something different, and we've liked some of the work that they've done. I think the jury's still out. They've done some good things, but we'll see what happens.
What's your feeling about Mercedes-Benz and BMW creeping below the $30,000 price point? Is that redefining luxury?
I think to a certain extent it is redefining luxury. It is making $30,000 a point where it's acceptable for a luxury brand to be. While that's a challenge for us, it's good for us because we've been just below that level for a long time. I think enhances our position.
It's a very interesting time not only to be a manufacturer but to be a dealer because we're now competing on a different level and that's always fun. It could be fraught with danger, but it could be a good opportunity to increase our sales.
Are Acura dealers making money on new-car sales?
I'm going to shock you by saying that grosses are never good enough.
I've never heard that before.
Honestly, they could be better. When I got in the business, I was taught the old saying that the difference between too many and not enough cars is one. We believe that inventory and production levels are key drivers in protecting grosses.
What's missing in the product lineup, aside from what we know is coming?
I think what we would like to see is some diversification in the model lineup. I don't think there's any disagreement to it. Right now, what's taken place over the last five years, is they've gone through the program that was laid out for us where TSX was going to go away and TL was going to morph into TLX, and that's going to fit the needs of the customers of both of those cars. We're going to have an entry level car like ILX, then TLX and then of course RLX. I think we're coming finally to fruition with all of that.
Now we'd like to see them diversify into some niche vehicles, maybe coupes and convertibles and things of that nature. We haven't seen any drawings yet, but we're certainly encouraging it. We'd also like to see some diversification in the powerplants. We'd like to see them look at turbos, diesels and hybrids.
We think that in order to really compete, you have to be in all those segments in order to be what I know they'd like Acura to be and what we think Acura can be, which is we'd like to get in that top tier of luxury brands. We think it's possible, especially with their history of building quality vehicles. But we need to diversify and put a little more investment into the brand and into the lineup, especially in the sedan lineup.